Instructions

ZOOM IN by clicking on the page. A slider will appear, allowing you to adjust your zoom level. Return to the original size by clicking on the page again.

MOVE the page around when zoomed in by dragging it.

ADJUST the zoom using the slider on the top right.

ZOOM OUT by clicking on the zoomed-in page.

SEARCH by entering text in the search field and click on "In This Issue" or "All Issues" to search the current issue or the archive of back issues
respectively.
.

PRINT by clicking on thumbnails to select pages, and then press the
print button.

SHARE this publication and page.

ROTATE PAGE allows you to turn pages 90 degrees clockwise or counterclockwise.Click on the page to return to the original orientation. To zoom in on a rotated page, return the page to its original orientation, zoom in, and
then rotate it again.

CONTENTS displays a table of sections with thumbnails and descriptions.

ALL PAGES displays thumbnails of every page in the issue. Click on
a page to jump.

SBG14 FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt APRIL 26 • 2015
Eventually every long-run-
ning drama, from "Dr
Who" to "Downton
Abbey," comes to feel for-
mulaic. So it is with the
sage of Greece s debt and
the euro. For five years it
has followed a wearily
familiar script of unpayable debts, aborted
reforms and 11th-hour compromises that let
the country stagger on inside the single cur-
rency.
That history has lulled many into expecting
the usual denouement in the latest wrangling
between Greece s Syriza government and its
European creditors. This is looking ever less
likely, however. Unless Syriza suddenly capit-
ulates---and a meeting of euro-zone finance
ministers on April 24 is one of its last chances
to do so--- Greece will fail to pay its creditors.
If that happens, its exit from the euro will be
only a step away.
Greece already has restructured its debts
once, in 2012. It now owes money mainly to
other European governments, the European
Central Bank and the International Monetary
Fund. These official creditors have slashed
interest rates and stretched out maturities,
but not enough. With a debt stock of 175 per
cent of GDP, Greece will need more relief.
Most European politicians quietly accept this.
The danger lies in a chaotic default born of
brinkmanship. The Greek government has bills
to pay and no money to pay them. It is resort-
ing to desperate measures. This week Prime
Minister Alexis Tsipras ordered local-govern-
ment bodies to move spare cash to the central
bank. That might buy a few weeks. In the end,
though, Greece will not be able to pay its
retirees, let alone its creditors, without a deal
with its European paymasters that unlocks
new loans.
That seems increasingly unlikely, for three
reasons.
The first is a deep loss of trust on the part
of Greece s creditors. The euro zone always
has had only a faint version of the solidarity
that characterizes a true union. Since Syriza
came to power, however, that has been ripped
apart. The stunts and stumbles of Greece s
inexperienced government are a factor, but
the bigger problem has been Syriza s unwill-
ingness or inability to name, let alone imple-
ment, the reforms that it will undertake in
return for its next installment of money. Once
Greece s creditors might have taken general
promises, but now they want specifics.
Second, today Europeans worry less about
the market consequences of a "Grexit." Thanks
to the 2012 restructuring, the direct effects of
another Greek default would be easier to handle
because Europe s banks, the weak link in any
panic, are now more insulated. As fears of
financial contagion have dwindled, so has
European creditors appetite for compromise.
Third, political constraints on both sides
make bargaining hard. Syriza was elected on
a promise to halt the endless austerity required
by its bailouts. The government has its own
factions to control, among them hard-left MPs
unprepared to make concessions on privati-
sations or pensions. Tsipras might need a ref-
erendum or another election to win a mandate
to backtrack, even if he wanted to. Voters in
creditor countries are tired of paying for Greece,
and politicians in places such as Spain, which
also have been through austerity, are hawk-
ish.Repayments to euro-zone lenders are not
due until the 2020s. If you add all these ele-
ments together, though, it is hard to see how
the Greeks can reach a deal that will let them
honor their more immediate debts to the ECB
and the IMF.
It is less clear whether such a default must
lead to Greece s exit from the euro. The two
need not go together: Greece defaulted on pri-
vate-sector creditors in 2012, after all.
Stiffing private investors with the support
of the euro zone is different from unilateral
nonpayment to official creditors, however. The
decisions of the ECB, which keeps Greece s
banks afloat, would be critical. The ECB does
not want to be the actor that precipitates a
Grexit by withdrawing support, and ratings
agencies helpfully have said that a missed pay-
ment to an official creditor would not constitute
a default.
If the ECB itself were not being paid, though,
that would be a hard line to hold. Nonpayment
also would depress the value of Greek banks
holdings of short-term government debt and
encourage deposit flight. That would leave the
banks needing more liquidity support from
the ECB exactly when doubts about their sol-
vency crystalised. The ECB is unlikely to help
then.
There are ways for Greece to defer disaster.
It could save hard currency by issuing scrip,
a type of IOU, in lieu of payments to its citizens.
That would be an open invitation to Greeks
to take their remaining euros out of the banks,
however, so the government could impose
capital controls. Cyprus has had these for two
years without leaving the euro, but that was
done in concert with its partners.
If Greece ever got to this stage, with a parallel
currency in circulation, capital controls in
place and bailout cash withheld, the gap
between default and exit would be paper-thin.
@2015 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
dicate
Greece on the edge